Corporate social responsibility, profits and welfare with managerial firms

Fanti, Luciano; Buccella, Domenico

doi:10.1007/s12232-017-0276-5

Cited by 51 publications

(38 citation statements)

References 41 publications

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“…Exceptions are, to the best of our knowledge, four recent articles: Goering (2007), Kopel and Brand (2012), Manasakis et al (2014) and Fanti and Buccella (2017). However, those papers model CSR following completely different approaches.…”

Section: Introductionmentioning

confidence: 99%

“…In particular, Kopel and Brand (2012) study the endogenous determination of the choice whether to hire managers in an exogenously assumed mixed duopoly. Fanti and Buccella (2017) assume as exogenously given the presence of sales delegation in both duopolistic firms and, differently from the other papers above mentioned, develop a game for determining whether both firms, only one firm or neither firms choose CSR rules at equilibrium. They show that at the SPNE both firms' owners follow CSR rules, so attributing a sound game-theoretic fundament to this seemingly unprofitable behaviour.…”

Section: Introductionmentioning

confidence: 99%

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Corporate Social Responsibility and Managerial Bonus Systems

Fanti

Buccella

2018

Ital Econ J

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This paper analyses the effects of managerial delegation on the equilibrium outcomes in a duopoly market in which firms adopt corporate social responsibility (CSR) behaviours (approximately measured, as usual, by their sensitivity to consumer surplus). In particular, the endogenous choice between the most common manager's bonus schemes-i.e. sales delegation (D), "relative profits" (RP) and "pure CSR objective function" (PCSR)-is investigated making use of a standard game-theoretic approach. It is shown that the sub-game perfect Nash equilibrium is given by the common choice of the RP scheme, whereas the CSR firm's objective function would be highest (lowest) under the PCSR (D) choice. Therefore, the well-known prisoner's dilemma nature of the managerial delegation game holds also when firms adopt CSR behaviours. Overall, these findings shed new light on the issue of the managerial delegation in the recently increasing cases of socially concerned firms.

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Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Corporate Social Responsibility and Managerial Bonus Systems

Fanti

Buccella

2018

Ital Econ J

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“…1 In the present framework, a large class of more general demand functions yields the same strategic incentives (Planer-Friedrich and Sahm 2020). 2 Incorporating consumer surplus into the firm's objective function is a standard way of modeling CSR (e.g., Goering 2008;Kopel et al 2014;Wang 2016;Fanti and Buccella 2017;Zennyo 2017;Nakamura 2018;Planner-Friedrich and Sahm 2020;Leal et al 2019). An alternative approach considers CSR as a means of vertical product differentiation (e.g., Arora and Gangopadhyay 1995;Cremer and Thisse 1999;García-Gallego and Georgantzís 2009;Manasakis et al 2013;Manasakis et al 2014;Liu et al 2015).…”

Section: Discussionmentioning

confidence: 99%

Strategic CSR in Asymmetric Cournot Duopoly

Planer-Friedrich

Sahm

2020

J Ind Compet Trade

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We examine the strategic use of corporate social responsibility (CSR) in Cournot competition between two firms that differ in their marginal costs of production. The level of CSR determines the weight a firm puts on consumer surplus in its objective function before it decides upon supply. We show that the more efficient firm chooses a higher CSR level, reinforcing its dominant position. If there are sufficiently large fixed costs of CSR, only the more efficient firm will engage in CSR.

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“…All those contributions find, as expected, that profits at the Nash equilibrium are damaged by CSR activities (also when the latter are endogenously determined). Remarkably, however, Fanti and Buccella (2017c) find that, in a duopoly market in which firms follow CSR activities under managerial delegation, in the Subgame Perfect Nash Equilibrium (SPNE) both firms are CSRtype and, in addition, the presence of CSR behaviour benefits the firms' profitability while harms the welfare of consumers and society), a result that contrasts the conventional one under non-managerial firms.…”

Section: Literature Reviewmentioning

confidence: 99%

Profitability of corporate social responsibility in network industries

Fanti

Buccella

2018

Int Rev Econ

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The present paper shows that, when firms compete in a non-cooperative way on the level of corporate social responsibility (CSR) in network industries, the conventional result of the prisoner's dilemma structure of the game in standard industries-i.e. to have social concerns is the Nash equilibrium, but it is harmful for firms' profits-vanishes and, for sufficiently intense network externalities, the equilibrium in which both firms have social concerns is more profitable than simple profit-seeking. Moreover, we show that-when firms cooperate in choosing the profit-maximising level of social concerns-a profit-maximising CSR level does exist, provided that network effects are sufficiently strong. Therefore, in network industries, firms may obtain higher profits engaging in-cooperatively as well as non-cooperatively-CSR activities, showing that firms' social concerns may be motivated by the owners' selfish behaviour. Finally, a counter-intuitive result as regards consumer's surplus and social welfare is obtained: those are always higher under competitive than cooperative choice of CSR because the level of CSR activities is higher in the former case. However, given that firms gain their largest profits with the cooperative choice of CSR, a Pareto-superior outcome is not reached.We are extremely grateful to the Editor, Luigino Bruni, and the three anonymous referees for their valuable comments and suggestions that have substantially enhanced the clarity and quality of the paper. All remaining errors are, of course, our sole responsibility. The usual disclaimers apply.

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Corporate social responsibility, profits and welfare with managerial firms

Cited by 51 publications

References 41 publications

Corporate Social Responsibility and Managerial Bonus Systems

Corporate Social Responsibility and Managerial Bonus Systems

Strategic CSR in Asymmetric Cournot Duopoly

Profitability of corporate social responsibility in network industries

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